Is the Era of “Cheap Food” Over?

Combining demonstration in Little Casterton, Rutland, Great Britain. An american Case combine pulled by a Caterpillar tractor, these were used just after WW2. (Photo credit: Wikipedia)

The Sovereign Man recently posted and article entitled, “The Era Of Cheap Food Is Over” which declared in part,

“There are only a few people who get it: the era of cheap food is over.

“Global net population growth creates over 200,000 new mouths to feed ever single day. Yet supply of available farmland is diminishing each year due to development, loss of topsoil, peak production yields, and reduction in freshwater supply.

“Of course, the most destructive is monetary policy. The unmitigated expansion of the money supply has led to substantial inflation of agriculture commodities prices.

“These fundamentals overwhelmingly point to a simple trend: food prices will continue rising. And that’s the best case. The worst case is severe shortages.”

So long as government is determined to inflate the currency, the prices of food (just like gold) must continue to rise.

More, although the rise in American food prices may be driven by American inflation, those price increases won’t be confined to America. As food prices rises in the US, they will also rise in foreign countries like Egypt, Libya, Greece and Spain.

As food prices rise in foreign countries, if those countries are already impoverished, the strain on their people will grow until we see more political turmoil of the sort seen in the A.D. 2011 “Arab Spring”.

Thus, inflating the US dollar will tend to foment revolution in third-world countries.

• Within the US, if inflation causes the prices of food and wages to rise equally, the inflation will be annoying but not troubling. In other words, if the price of food doubles at the same time my income doubles, it’ll be a little disturbing, but I’ll be fine.

But—will prices and wages both rise equally in a national economy that’s already in recession and subject to rising unemployment?

No.

Because of the recession, unemployment is rising, the competition for jobs is rising, and the wages being paid are falling.

Because of the inflation, the prices of food and other goods and services should be rising.

Because we must eat if we want to survive, we must buy food. If the price of food is rising at the same that our income is falling, that means that we must necessarily “tighten our belts” and stop buying other, non-agricultural goods and services that are not as essential as food. That means that the cost of food will become an increasingly larger portion of our budgets.

Conversely, while we spend a greater proportion of our income on food, we’ll have less money to purchase a new flat-screen TV, a car, or home.

Thus, because of rising food costs, there’ll be less demand for non-agricultural products and less demand for non-agricultural workers—which includes most of us. More people will be unemployed, wages will fall further, and (so long as government wants to cause inflation to reduce the national debt) the price of food will continue to rise and become even more of a burden on American consumers.

Ever eat a rat? Well, maybe it’s time to start adjusting to that possibility.

In fact, I don’t expect Americans to soon see circumstances of the sort that precipitated the “Arab Spring”. But we are heading in that direction and we’ll continue on that path so long as the government wants and causes inflation. We may not be eating rats any time soon, but lots of us may soon trade our appetite for steak on the grill for Spam in the can.

• I presume the US government will continue to cause significant inflation:

1) for the overt purpose of stimulating the economy; and,

2) for the covert purpose of reducing the national debt.

But if the government’s inflation doesn’t raise the prices of foods, goods and wages equally, and if the prices of goods and foods rise faster than wages, then the government’s attempt to allegedly “stimulate” the economy with inflation will not merely fail—it will actually cause further depression in the economy.

Get that? If the price of food rises (is being inflated) faster than the price of wages, the average worker will necessarily have less money to spend on non-agricultural goods and services. As demand for non-agricultural products falls, so will the demand for non-agricultural employees. That means rising unemployment and an economy falling more quickly towards overt depression.

In the end, justifying inflation as a means to stimulate the economy is a lie. Instead, the only valid reason for inflation is to reduce the national debt.

Nevertheless, I have little doubt that government will persist in inflating the US dollar in order to reduce the national debt–even though doing so pushes the American people deeper into recession or depression.

The people most likely to weather the coming food inflation are those most closely involved in agricultural production and those who preserve their savings with inflation-resistant gold.

• Crude oil is so essential to the production of fertilizer and to provide fuel for the global production and transportation of food, that modern agriculture has been described as the process for turning crude oil into food.

It’s certain that during A.D. 2010 and 2011 the rising price of crude oil (which peaked around $114/barrel in April A.D. 2011) forced food prices in 3rd world nations to untenable levels and thereby helped trigger the “Arab Spring”. Thus, higher crude prices caused higher food prices which caused the Arab Spring which caused four mid-east governments to be overturned and thirteen more to be threatened with political turmoil.

It’s conceivable that the decline in crude oil prices since the Arab Spring may have been mandated by political concerns more so than market forces. I.e., the current price of crude is $87/barrel—a 24% decline since the $114 peak in A.D. 2011. It’s possible the price of crude may have been intentionally depressed since the A.D. 2011 Arab Spring to try to suppress rising food prices and therefore “stabilize” the Middle East.

If so, the US may be caught in another one of those rock/hard-place positions where they’re darned if they do and darned if they don’t. I’m convinced that the US government wants inflation in order to get out from under the national debt. I’m also convinced that if the US government inflates the dollar significantly, it will thereby raise food prices on a global basis and precipitate more unwanted revolutions in 3rd world countries.

So which problem is more onerous to the US government—the national debt or foreign revolutions?

Hard to say, but I’d bet that the national debt is government’s Number One bugaboo. If I’m right, they’ll focus on inflating the dollar and say “To Hell with the 3rd World’s revolutions”. But with the resulting rise in the U.S. price of food (but not wages), the government may collapse the economy.

OK—so maybe they won’t inflate but, if not, how will they deal with national debt? If they can’t pay it off with cheaper (inflated) dollars, then they could admit that the government is bankrupt and simply repudiate all the debt and not pay any of it. But if they repudiate, they’ll wipe out virtually all of America’s (and maybe much of the world’s) creditors who’ve stored their saving in paper debt-instruments. If the government wipes out the creditors, the government may collapse the economy.

OK, OK—so maybe we don’t inflate, and maybe we don’t repudiate—then what? Hey, we could raise taxes on all the idiot taxpayers, right?! Then we could use increased tax revenues to pay off the national debt!

Sure, we could. Except for one thing—if taxes are raised, the government might collapse the economy.

OK, OK, OK—if we can’t inflate, repudiate, or tax, what’s left?

War. Maybe all this economy really needs is another good ol’ fashioned World War. WWII worked great to get us out of the Great Depression. Another WW may be just what the doctor ordered when it comes to eliminating the national debt and stimulating the economy.

‘Cept for one thing. If government gets another WW going, the economy might not merely collapse—it might be vaporized.

• My point is that I don’t see a painless way out of this of our economic predicament. I can’t even see a sane way out of this mess. No matter what government does, the ultimate result will probably be chaos or a police state.

I admit that a very astute mix of inflation, repudiation, rising taxes and just a smidgeon of WW might prevent an economic depression or collapse. But the chances of finding and precisely implementing that “very astute mix” are almost nil.

Therefore, I can’t avoid the conclusion that we’re heading for an economic debacle. Maybe it’s six months from now. Maybe it’s six years from now. I can’t tell the time. I can see that debacle is inevitable and beyond our capacity to escape.

Buckle up.

<<I confirm the subscription of this blog to the Paperblog service under the username adask>>

If the government can by their mismanagement collapse the economy this would just be proof that it is their economy to do with as they will. There should be little concern over what some foreign entity does with objects they own.

Hey Al,
I don’t know how to contact you any other way. So, I thought you should read this in order to get some encouragement from past development. Attached is a speech given to the House of Lords by Edmund Burke in 1774. He was trying to convince them of the need to seek peace with the colonies. I hope you enjoy it and use it for some enlightened commentary when you can.

I think there may be plenty around these days. We don’t always know about their exploits because those usually occur in the “courts not of record.” There has to be some kind of restraint caused by “Pro Se” activists. The lawyers will rarely stand for righteousness. If a little bit of knowledge went a long way then, how much more now?

“Abstract liberty, like other mere abstractions, is not to be found. Liberty inheres in some sensible object; and every nation has formed to itself some favourite point, which by way of eminence becomes the criterion of their happiness.”

You may not appreciate it, Al, but you help to make Liberty less abstract with each posting. I can tell most of your readers are learning about how to do the very same thing. I consider myself a very fortunate man.

Buck

December 9, 2012 at 8:13 PM

Im still amazed it has made it this far. If more people could trade goods and services in gold and silver we could ignore the gov. Of course we could still get invaded in retaliation for default.

They are going to need to raise interest rates to recall the stimulation. So that will cause a spike in inflation. Also the dollar is getting dumped by several countries so that should cause that cash to flood back to our country. I would expect a nice ride upwards in inflation very soon.

We were the petro dollar, but that is declining in the medium of exchange. Soon the us fiat dollar will have no use, thus no value. I cant imagine a scenario to alter that.